2004 (9) TMI 126 - HC - Customs

Summary

Issues Involved:
1. Demand under Section 72(1) of the Customs Act
2. Notice to the owner before detention and sale under Section 72(2) of the Customs Act
3. Validity of detention orders without compliance with Section 72 of the Customs Act
4. Procedure for sale of detained goods under Section 72(2) read with Section 142 of the Customs Act and CBEC Circulars
5. Vesting of company properties in the Official Liquidator upon winding up order

Detailed Analysis:

1. Demand under Section 72(1) of the Customs Act:

The court examined whether the proceedings dated 7-1-2002 constituted a valid demand under Section 72(1) of the Customs Act. The court found that the letter dated 7-1-2002 was merely an informal communication and did not meet the requirements of a demand notice under Section 72(1). The letter lacked specific details such as the full amount of duty chargeable, penalties, rent, interest, and other charges payable. Therefore, it was concluded that no proper demand was made by the proper officer, which is a prerequisite for invoking Section 72(2).

2. Notice to the owner before detention and sale under Section 72(2) of the Customs Act:

The court emphasized that under Section 72(2), the proper officer must give notice to the owner of the goods before causing them to be detained and sold. In this case, no such notice was given to the owner of the goods before the detention order dated 27-2-2002 was passed. This lack of notice rendered the detention order invalid.

3. Validity of detention orders without compliance with Section 72 of the Customs Act:

The court declared that both the detention orders dated 19-12-2000 and 27-2-2002 were ab initio void and non est in the eyes of the law. The detention orders were issued without proper demand under Section 72(1) and without notice to the owner under Section 72(2). Consequently, any subsequent actions, including the seizure and proposed sale of the goods, were also invalid.

4. Procedure for sale of detained goods under Section 72(2) read with Section 142 of the Customs Act and CBEC Circulars:

Although the court did not need to address this issue due to the invalidation of the detention orders, it noted that Section 72(2) does not prescribe a detailed procedure for the sale of detained goods. The court held that the procedure outlined in Section 142 of the Customs Act and the CBEC Circulars must be followed for the sale of such goods. The respondents had obtained a bond from the company agreeing to follow the procedure under Section 142, which includes guidelines for attachment and sale of properties.

5. Vesting of company properties in the Official Liquidator upon winding up order:

The court held that upon the passing of a winding-up order, all properties of the company vest in the Official Liquidator under Section 456(1) of the Companies Act. Since no sale of the goods had been effected as of the winding-up order date (1-12-2003), the machinery seized by the respondents must be handed over to the Official Liquidator. The respondents must prove their claim of dues before the Official Liquidator, who is now the custodian of the company's properties.

Conclusion:

The court allowed the application, directing the respondents to hand over possession of the 128 wooden cases of machinery to the Official Liquidator. The Official Liquidator was instructed to take appropriate steps in accordance with Section 456(1) of the Companies Act and any further directions from the court.